Airbnb cuts deal with B.C. government to remit sales taxes

Airbnb will collect provincial sales taxes on all short-term rentals in B.C. in a new agreement that amounts to a Canadian first.

Finance Minister Carole James said Wednesday her government and Airbnb had reached a deal for the company to remit, on behalf of its 18,500 B.C. hosts, the eight per cent PST and the up-to-three per cent municipal and regional district hotel tax. The agreement would mean an estimated $16 million a year for the province and $5 million for local governments, according to the province.

“Government needs to keep up with the growing and changing economy. We need to ensure the businesses and people taking part in the sharing economy are paying their fair share of taxes,” James said.

Revenues collected by B.C. would be spent on affordable housing measures that would be found in the Feb. 20 provincial budget, James said, later noting “every penny makes a difference.”

Erez Aloni, an assistant professor at the University of B.C.’s Peter A. Allard School of Law, said it was likely other parts of Canada would pursue similar agreements.

“I think it has become the norm,” he said, adding that several other jurisdictions had experimented with the idea before B.C. “Now that we know not only that it works, but that Airbnb is collecting it for the province, there is absolutely no reason for other provinces not to follow.”

Airbnb collects and remits taxes in France, Germany, India, Italy, Mexico, the Netherlands, Portugal, Switzerland and the U.S., according to the company. It also collects a lodging tax in Quebec.

B.C.’s agreement with Airbnb would require legislative and regulatory changes, according to the province.

Andrew Weaver, the leader of the B.C. Green party, called the announcement “a good first step from a tax fairness perspective,” but said it would not help free up long-term rental stock pulled from the market by short-term rentals.

“We are in a crisis. We need to ensure that houses are used for homes for British Columbians first and foremost. The province should work with local governments to return units to the long-term rental supply,” he said in a written statement.

Andy Yan, the director of the City Program at Simon Fraser University, criticized the agreement.

“In the housing realm of sub-one per cent vacancy rates, this tax is kind of like using cigarette taxes to pay for lung cancer treatments,” Yan said, adding that short-term rentals often take affordable housing from the market altogether.

Local governments in B.C. are grappling with short-term rentals.

Recently, the City of Vancouver moved to regulate them and has new rules that come into effect in April. Residents will be able to rent out their principal residences for short terms using services like Airbnb so long as they purchase a $49 annual licence and pay a $54 one-time activation fee. Renters would need approval of their landlords and condo owners would need support of their strata council.

Sue Willis, the president of the B.C. Bed & Breakfast Innkeepers Guild, said that Airbnb is just one of about two dozen online short-term rental listing services. She said her industry has sought a “level playing field” through regulations where all hosts are licensed for the sake of guest comfort and safety.

She expressed concern that the B.C.-Airbnb agreement could lead to a change to a key tax exemption relied on by bed and breakfasts. Under the PST Exemption and Refund Regulation, accommodation provided by someone who offers fewer than four units is not taxed provincially, she said.

The Finance Ministry did not immediately respond to an question about whether the announcement would change the exemption.

The province said it hoped to work with other short-term rental companies to have them collect taxes as well.

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